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Ask the Experts: Where Do We Get Our Spending Habits From?

Ask The Experts Where Do We Get Our Spending Habits From

In this edition of our “Ask the Experts” series, we attempt to pinpoint the source of our personal finance behavior with experts in the fields of business, sociology, political science, and economics.

It’s an interesting question:  Are our spending habits learned, and if so, from where?  I mean, do we get them from our parents?  Could the example set by other authority figures, such as government officials, influence our actions?  Or, perhaps spending habits are as personal and unique as finger prints.

Not only might those questions pique your intellectual curiosity, but their answers also carry great importance in the current economic climate.

As consumers, we continue to rack up credit card debt in record numbers, as if the housing bubble party continues to rage on.  We’re also still trying to sort out the countless underwater mortgages leftover from the Great Recession, and many folks believe that our more than $1 trillion in outstanding student loan debt puts us on track for another economic crisis down the road.

Then there’s the government.  In between dodging crises borne from cliffs and ceilings, the country’s political leadership is managing to ensure that prodigious debts will be a thing of the future by padding budget deficits by the trillion.  You can’t ignore the effect of pop culture either, as celebrities seem to prize mammoth houses, fancy cars, “Black Cards,” and walk-in closets bigger than many New York City apartments.

So, who’s to blame?  Well, let’s see what the following experts have to say:

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Michael McCall

The professor and chair of marketing & law at the Ithaca College School of BusinessOn how personal associations and triggers impact consumer spending habits:

I’m less convinced that government spending plays as much of a role as your own personal history with credit. We did a study a number of years ago where we found that people who were given their restaurant bill on a tip tray that contained a credit card logo tipped significantly more, so much so that I sent it off to a journal and the editor said, ‘Interesting, but I don’t believe you. Do it again.’ And so we were able to replicate it. Your tips go from somewhere around 15, 16% to 19 to 20% simply because of the credit card logo.”

Interestingly, McCall says the same study yielded the exact opposite result when replicated in New Zealand. “In New Zealand, apparently, being in debt is a bad thing,” he noted, tongue in cheek. “I wonder if it will ever catch on here.

On situations in which government action can indeed affect consumer spending habits:

I think to the extent that [consumers] see the government’s behavior influencing the prices that they have to pay, that causes a reaction. … If the government adds regulations and airline fares have to go up because of that, you certainly get a backlash from the consumer. … When we think of government, we often think of it as in Washington, but we also might think of it as local government. If we see local government spending large sums of money and then all of a sudden the parking rates in the community garages go up, there will certainly be some backlash there.

On the role that parents play:

I certainly think [parental influence] plays a role, but I’m not sure it’s imitative – it’s almost reactive. Baby Boomers were the most highly spending people of all time and yet it was their parents that went through the Depression. My grandfather, he went through the Depression and saved for a rainy day, and it never rained in his lifetime. The funny thing is, after he did pass away, my grandmother found CD after CD after CD for probably close to three-quarters of a million dollars hidden in dresser drawers. … You kind of go the other way that your parents did. But, again, it’s unclear; the real question would be how much do children know about their parents’ spending habits and their debt situation?

On the impact of mood on spending habits:

Chances are when you’re flush with cash you’re going to do something that makes you feel good. We use as a wonderful example Ben & Jerry’s Ice Cream. It’s a total psychological purchase because, in part, you buy Ben & Jerry’s specialty ice cream when you’re feeling bad, it helps you feel better. You buy Ben & Jerry’s when you’re feeling better because you want to celebrate. So, feeling good or bad, you’re buying Ben & Jerry’s.

On the connection between spending and self-image:

It’s the whole idea that we make purchases, we spend money to manage how people see us. You have an image of yourself and you buy stuff that will tend to support that image. So we buy clothing, we buy extras, we go out to nicer restaurants, we buy special wines in order to not only make ourselves feel good, but to communicate to others something about us. … When you see the extravagance of athletes and others when they’re out, I think there is definitely a tendency or an interest or a willingness to imitate that.
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Sean Reardon

Professor of sociology and Director of Stanford University’s Interdisciplinary Doctoral Training Program in Quantitative Education Policy AnalysisOn the impact of socio-economic factors:

The gap in test scores on math and reading tests between high and low income students has grown pretty dramatically over the last several decades and is now much larger than, say, the black-white test score gap, which is also large. I think one of the implications for that is that how well you do in school matters increasingly for how well you do in the labor market – you know, a college degree is increasingly necessary to get a good job and so on.

It’s not that poor kids are doing worse on tests. Poor and middle-class kids are seeing upward gains in their test scores over time, but children of high-income families’ test scores are going up much faster than the middle class or low-income students. It’s really driven by investments of time and money of high-income families in their children’s cognitive development that causing it. It’s not that poor kids are doing worse, it’s that rich kids are doing much, much better.
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Lars Perner

Assistant professor of clinical marketing with USC’s Marshall School of BusinessOn the roles played by governments and parents:

I don’t know so much about the government, but certainly one would learn habits from one’s parents. It doesn’t mean that one would follow those completely, and sometimes you actually find people with had rather responsible parents who end up spending more themselves, but if you’re exposed to a bad influence that would probably, in most cases, lead the person to be more open with spending. In some cases, you might see parents getting into so much trouble that you vow to be different, but that’s the exception rather than the rule.

On consumer reactions to government behavior:

I think the issue of government influence on spending is complex because, on the one hand you hear about the large sums of money spent by the government, and on the other hand, you hear about how this is done because of a sluggish economy. So, in a sense, government spending may drive home the point that the economy is weak and that may actually have a discouraging effect.”

Interestingly, Dr. Perner also notes that broader economic factors in which government can also force consumers to adopt certain habits. For example, he says that in countries such as Brazil that have high rates of inflation, workers have to cash and spend their paychecks immediately in order to avoid seeing their money depreciate.
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Sheri Berman

Professor of political science at Barnard CollegeOn the role politicians play in shaping spending habits:

I would imagine more “average” people take their social and economic cues from movie, TV, etc. stars than from politicians. … I do think that what politicians view as ‘legitimate’ matters. So if there are a lot of public figures out there, for example, saying that inequality doesn’t (or does) matter; that is OK to flaunt (or not flaunt) your wealth; to pay (or not pay) high taxes, yes, I do think that affects people’s views and behavior. Indeed, I would say that for the President in particular, the ‘agenda setting’ aspect of the office is crucial (and powerful). I would say ditto for other advanced industrial nations, i.e. what seems legitimate or appropriate in contemporary political discourse and practice does probably exert some effect on how people think and act.
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Bruce Pfeiffer

An assistant professor of marketing in the University of New Hampshire’s Peter T. Paul College of Business and EconomicsOn the origin of spending habits:

Spending habits are definitely learned by example. Who people choose to emulate depends on who they admire, respect, and/or aspire to be like.

On whether or not setting a positive example could lead to a healthier economic environment:

We can definitely promote responsible spending. Advertising commonly uses celebrities and other people that consumers admire or aspire to be like to promote their products. Unfortunately, the problem with using celebrities to promote responsible spending is that it is not believable. Celebrities are generally perceived to be extravagant. So, the difficulty in regards to using examples to influence responsible spending is finding influential and believable examples for people to emulate.
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Benjamin Ho

Assistant professor of economics at Vassar College and the former lead energy economist at the White House Council of Economic AdvisersOn the connection between government and consumer spending:

I hate it when people take the government as metaphor for personal behavior too literally. The current national debt is about the same as GDP. That’s a bit like a person who makes $50,000 a year having a mortgage that costs $50,000, which really doesn’t sound too bad.


There’s obviously a lot to digest here, but let’s see if we can whittle down all the experts’ great insights into a few concise takeaways.

  1. Any number of things could influence your spending habits, from the way your parents manage money and your mood to the economic climate and your affinity for pop culture.
  2. People don’t tend to emulate government spending habits, but government policy can impact the way in which consumers approach their finances.
  3. It’s important to take stock of your personal spending “triggers” so you’re cognizant of when you might be entering dangerous territory or adopting bad habits.
  4. As always, keeping a budget is extremely important.  Adopting the Island Approach and designating one card for everyday spending and another for paying off debt will help in this regard, making it possible to garner the best collection of terms and providing a built-in overspending alert system (finance charges on your everyday spending card will signal the need to cut back).
  5. While it would be easy to use the various factors that influence our spending habits as excuses for living beyond our means, we all have to come to grips with the fact that doing so is not only costly, but that it also puts the economic fate of our country at risk.

Image: Tom Wang/Shutterstock

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